Projection for EURUSD: The euro should continue to benefit from risk movements.

VOT Research Desk

Market Analytics and Considerations

Fundamental and Technical Analysis

Following Monday’s erratic behavior, the EURUSD has gained positive momentum.

Before aiming towards 1.0500, the euro (EUR) will encounter temporary resistance near 1.0450.

As risk flows take over markets, the US dollar remains under selling pressure.

For the very first time after July, the EURUSD has gained traction and soared above 1.0400. The pair seeks to extend last week’s gains in the wake of Monday’s downward correction as risk flows dominate the financial markets. Additionally, the short-term technical forecast demonstrates that the bullish bias is still present.

In the absence of high-impact macroeconomic data releases, the US Dollar managed to stay resilient against its major rivals at the beginning of the week and the US Dollar Index gained 0.5% on Monday. US Federal Reserve Vice Chair Lael Brainard said that it will soon be appropriate to reduce the pace of rate hikes later in the day and limited the USD’s gains.

Early Tuesday, US stock index futures are up between 0.5% and 0.9% on the day, pointing to an improving market mood. In case Wall Street’s main indexes open decisively higher, the USD could come under renewed selling pressure in the second half of the day and open the door for another leg higher in EURUSD.

The third-quarter Gross Domestic Product (GDP) will be on the economic agenda for Europe this Tuesday. This statistic will be reviewed, and it is anticipated that it will remain at 2.1% (YoY), therefore it is unlikely to cause a significant market response. For additional inspiration, the ZEW Survey for Germany and the Eurozone will be considered. The Euro (EUR) may strengthen initially if the flagship Economic Sentiment Index performs better than anticipated in November.

The Producer Price Index (PPI) information for October will be made public later in the day by the US Bureau of Labor Statistics. The Core PPI is anticipated to remain constant at 7.2% annually. Investors may interpret a weaker PPI print as justification to keep unwinding their long positions in the US Dollar, even though it can be challenging to determine how producer inflation affects consumer inflation.

Technical Analytics

After finding support near the bottom limit of the ascending regression channel that dates back to early November on Monday, the EURUSD is still trading within it today. However, the four-hour chart’s Relative Strength Index (RSI) gauge is once again over 70, indicating that there may be another bearish adjustment first before pair attempts to reach new multi-month highs.

On the upswing, the first resistance level lines up with 1.0460 (a static level from July, the top of the rising channel). The very next level that the EURUSD could aim for is 1.0500 (a psychological level, or static level), if it rises above that one and validates it as support.

Prior to 1.0350 (lower limit of the rising channel) and 1.0300 (psychological level, 20-period Simple Moving Average (SMA)), 1.0400 (psychological tier, mid-point of the upward channel) forms temporary support.

Pivots